Global insurance rates up record 8% in Q3, finds Marsh Index

Marsh’s Global Insurance Market Index recorded its largest ever commercial insurance price rise of nearly 8% in the third quarter since it began tracking data in 2012, Marsh & McLennan Companies (MMC) CEO Dan Glaser revealed during the broker’s latest results call, as the firm posted strong revenue growth since the JLT acquisition. The average global price rise across P&C lines means the cost of insurance has now risen each quarter for the past two years and compares with a jump of 6% in Q2 and 3% in Q1. According to results service Seeking Alpha, Mr Glaser told analysts that global property insurance and financial and professional lines saw the highest average renewal rate increase of 10% and 14% respectively in the third quarter. Casualty rates are up 1% but mixed by business lines, with excess rates rising and workers comp down, said the CEO and president of MMC. Also speaking on the call, John Doyle, president and CEO of Marsh, said: “Overall casualty pricing at the moment is mixed. Workers Comp is down five, general liability primary pricing is still down modestly, including in the US, but excess liability is up 6% versus 3% in the second quarter and that market is seeing a bit more stress at the moment. So, we of course again are trying to get the best outcome for our clients and we'll find solutions no matter where they might be in the world.” Mr Glaser noted that the index is skewed to larger risks, which are seeing higher increases. But he noted that rates for middle-market and small companies are also up in certain geographies. “At the moment, middle-market pricing is not moving up as much as large account pricing, which we have more exposure to from a commission point of view. We're certainly working with our clients to mitigate the impact of price increases,” explained Mr Doyle. Mr Doyle also expects “upward pricing pressure to continue throughout next year”. He noted some pretty big material losses in the casualty market and expects more stress to access that market in particular in the near term. “There are some areas where you can point to meaningful exposure changes, right. So, in the case of D&O maybe, for example, there's been a material increase in the frequency of securities claims that are in the market,” said Mr Doyle. He said the overall P&C market is challenging in certain segments and stressed that he does not see it as one market hardening, but a collection of markets operating at different speeds.Mr Doyle believes any cycle will be shorter lived than in the past. “I think we'll see shorter and shallower cycles than we have on average in the past, so really kind of micro-cycles. Underwriters are moving quickly to get better data, better management information. They're moving more quickly to deal with things. But capital moves very quickly to where profit pools emerge as well. So again, I expect more shallow and shorter pricing cycles,” he said. This point was picked up by Mr Glaser. “Better management teams at underwriting firms, better data and analytics create more of a micro-cycle environment where it's not necessarily broad across all sectors and all segments. And that's really occurring on the reinsurance side as well. We're not seeing broad, market-wide impact, even as a result of the loss creep that we've seen over the last six months coming in from prior years and some big losses this year,” he said. Adding: “But there are potential significant changes on individual programmes, based upon the individual programme’s characteristics like geography performance in the past and that sort of thing. So, I think the better data and analytics are making it more of a targeted approach, as opposed to a broad brush.” Speaking specifically on reinsurance, Mr Glaser said there have been rate increases in the property catastrophe market throughout this year, based on loss activity, geography and exposure increases. The two executives were speaking during MMC’s third-quarter results call. The firm recorded 13% revenue growth to $4bn during that period, with revenue up 10% for nine months to $12.4bn. This sets the company up for a “solid year”, said Mr Glaser. Including JLT results since 1 April, Marsh said underlying revenue growth – calculated as if Marsh & McLennan and JLT had combined for a full year – was up 5% for the third quarter and 4% for the first nine months. Revenue generated by the Risk and Insurance Services unit, which houses most of JLT’s business, totalled $2.2bn in the third quarter. This up 18% or 6% on an underlying basis. Revenue for nine months totalled $7.2bn, up 14%. Third quarter group operating income fell from $541m to $467m, and from $2.14bn to $2.09bn for the first nine months. Operating income fell 26% to $218m at Risk and Insurance Services. Revenue for Marsh business, excluding Mercer, totalled $1.9bn in the third quarter of 2019, up 17%. EMEA region revenue was up 22% to $536m during the third quarter, but Asia-Pacific operations saw the strongest growth of 45%, to $242m. During the nine months to 30 September, Marsh’s EMEA region increased revenue by 13% to $1.8bn and Asia-Pacific’s growth increased 36% to $698m, out of a total $5.8bn. Mr Glaser said the integration of JLT is going as planned and the combined company is meeting expectation when it comes to financial targets, revenue growth and colleague retention. “Co-locating our teams is a critical part of our integration, because it enables the cultures to coalesce as well as resulting in increased collaboration… To date, we have moved over 8,000 colleagues and by the end of 2019 nearly all colleagues will be sitting side by side in their respective areas of operation globally. We've also undertaken significant work to integrate our platforms,” he added.

Global insurance rates up record 8% in Q3, finds Marsh Index

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